Malawi economy to grow 5.0 % – Finance Minister

Malawi’s Finance Minister Dr Ken Lipenga has estimated that the potential rate of the 2013 domestic economy growth is going to rebound to 5.0 percent up from 1.8 percent in 2012 with expenditure pegged at K479.1 billion by the end of the financial year compared to K475.8 billion revised at Mid-Year.

Mechanically, growth would be consistent with ‘economic recovery’ with inflation to fall to 14 percent by the end of the year, down from 30-plus percent today.

Presenting his budget statement in Parliament on Friday, Lipenga told lawmakers in Lilongwe also disclosed that the inflation is expected to slow down to 14.2 percent by December 2013 and to 7.0 percent by December 2014 as the ailing economy continues to heal.

The eloquent speaking Lipenga also added that 2013 domestic revenues were expected to amount to K283.5 billion, surpassing the Mid-Year revised target of 278.9 billion by K4.6 billion, “largely on account of tax revenues, which are projected to amount to K253.6 billion against a Mid-Year revised target of K243.8 billion”.

Lipenga: Economy healing and to grow

Lipenga presented a K603.4 billion 2013/14 “Transitional and Recovery Based budget”, set for review by Parliament, with ministries of agriculture and education getting largest allocations.

The minister attributed the economic growth mainly to improvements in the Agricultural, Forestry and Fishing sector.

“The rebound in agriculture is partly propelled by increases in tobacco production from 79 million Kg in 2012 to 156 million Kg in 2013. In addition, manufacturing is also expected to increase on account of higher tobacco processing and fewer production bottlenecks related to fuel and foreign exchange problems,” outlined Lipenga.

He said capacity utilization in most of the sectors has shown great improvement and that grants underperformed marginally from the revised amount at mid-term.

“The revised target at mid-term is K179 billion, but we now expect that K175 billion would have been disbursed by the end of the financial year, due to challenges of absorption in our Ministries, which are now being addressed as a matter of urgency.

“Government is expected to spend K479.1 billion by the end of the 2012/13 financial year, compared to K475.8 billion revised at Mid-Year. The upward adjustment is due to increases in foreign financed development expenditure, which has increased by K6.4 billion although its effect was moderated by a K2.7 billion decrease in domestically financed development expenditure.

“On recurrent expenditures, although the increases in wages and salaries led to a K4.2 billion increase in the wage bill, corresponding cuts in purchases of goods and services and subsidies and transfers eased the pressure and contained recurrent expenditures within the target by K0.5 billion”.

He added that the overall balance for the 2012/13 financial year is expected to be K18.2 billion which will be wholly financed by foreign borrowing as government expects to repay domestic debt amounting to K18.6 billion, thereby meeting target for net domestic borrowing for the period ending June 2013.

Meanwhile, Lipenga assured the nation government would strive to live within means while continuing with tight fiscal and monetary policy stance to ensure that operations do not contribute to inflation and crowding out of the private sector.

“The 2013/14 financial year budget seeks to build on the successes of the 2012/13 financial year budget and consolidate the gains from the economic reforms undertaken. Within the context of a tight budget, government remains committed to strict expenditure controls and substantive reforms in order to strengthen and promote a culture of enhanced transparency and accountability in the management and reporting of public finances to avoid over-expenditure.

“I can assure the Honorable Members of this House that we remain committed to using public resources efficiently and effectively, ensuring value for money and focusing our efforts on achieving sustainable delivery of services”.